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The second-largest toilet paper maker in the United States has warned that it will soon increase prices for products ranging from toilet paper to diapers.
Kimberly-Clark said in a press release that the increases “are necessary to help offset significant inflation in raw material costs,” reflecting higher procurement costs.
The price increases, which take effect in June, will be “in the mid-to-high single-digit figures,” the statement said.
The hikes will touch on baby and child care products, adult care products and Scott toilet tissue. The company is also known for manufacturing Cottonelle and Viva hygiene products, Kleenex, Kotex and Huggies diapers.
It is not yet clear whether any of the price increases will be passed on to buyers and families. Kimberly-Clark said he would increase list prices, which are the prices paid to suppliers of a product. Retailers decide what to charge consumers at the store level.
Toilet paper and other essentials quickly disappeared from store shelves last year during the first weeks of the lockdown pandemic, as shoppers stocked up en masse for months at home.
The nationwide surge in demand quickly undermined a supply chain based on the principles of “lean inventory” and “just in time”, leaving little inventory or additional leeway in the system.
Production fell behind as producers faced shortages of raw materials and packaging. Transportation providers had higher demand and fewer drivers.
Kimberly-Clark faces several headwinds, including lower expected birth rates, significantly higher procurement costs and increased costs due to higher promotional activity, according to a note by Arun Sundaram, analyst for CFRA Research, an independent business data company.
In a recent earnings call, Michael Hsu, CEO of Kimberly-Clark, said: “We expect a more challenging environment, especially compared to last year. We expect some of the benefits net of Covid dynamics, including increased consumer demand, are reversing. In addition, commodity prices are rising globally and we also reflect our latest take on economic conditions and rate trends. birth rate. “
The cost of wood pulp, a key component of paper in toilet tissue and other products, soared in February, as Chinese speculators pushed up spot prices by nearly 50%. Pulp producers in North America began to divert local supplies east to take advantage of rising prices, which further reduced supplies for manufacturers like Kimberly-Clark.
Kimberly-Clark, who is based in Dallas, is the latest company to raise prices due to soaring raw material costs. Hormel Foods and Cheerios maker General Mills have said they will increase their prices to offset the higher cost of grain, as well as high shipping prices.
Increased consumer demand and a decrease in logistics capacity have plagued supply chains and shipments around the world since the start of the pandemic, adding delays and costs for producers.
The fragility of the interconnected system was highlighted last month, when the Ever Given, a huge container ship, blocked all traffic through the Suez Canal, causing worldwide losses of nearly $ 10 billion per day.
Ever Given has been bailed out and passage through the channel resumed, but the backlog could slow trade for several months due to ‘supply chain contagion’, in which an event quickly affects people. other sites, John Mangan, professor of shipping and logistics at University of Newcastle in England, said this week.
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